The Manager of the LLC should decide how company funds are to be used. You should contact a corporate litigation attorney to help you.
Yes, the LLC must be named. A judge will supervise how the LLC assets are accounted for and distributed.
You both need to consult a CPA to determine the tax consequences of what you are attempting and consult a mediator to see if you can fashion a "win-win" solution which will be much less expensive than litigation.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
The company must be named as a nominal defendant. As a nominal defendant, it pretty much takes a back seat.
Depending on the allegations against your partner, your partner could be forced to hire independent counsel.
Feel free to contact me for a free consultation--my office is in Laguna Hills.
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
Why not start with the company attorney to see if there is a way to resove the issues before you start litigatopm? If you do not have a company attorney, consult with a corportate attorney as there may well be a way to resolve the issue and save everyone a lot of money. There are ways to resolve such dsputes witout lititgation, assuming there is some degree of reasonableness between the parties.